Amid pandemic, Moe’s operator looks on the bright side

Florida Gov. Ron DeSantis closed restaurant dining rooms on March 20, just 10 days after franchisee Quality Fresca acquired 46 Moe’s Southwest Grills in the state from four different franchisees. The new franchisee now sold burritos curbside. Predictably, revenues slumped.

Bad timing? Not really, insisted Matthew Slaine, chief executive of Quality Restaurant Group, which financed the deal that also included 21 Moe’s in northern Virginia, Maryland and Charleston, South Carolina. Quality Fresca is a new division of QRG formed to operate Moe’s.

“Certainly no one likes to see their comp sales down, but at the same time you get a real true sense of who the franchisor is, who your leadership team is — and what it can do during a stressful time very quickly,” he explained.

In fact, he added, there was more than a silver lining to the apparently ill-timed transaction. Seasoned operator Chris Grooms and his staff had the opportunity “to test things out instead of taking a back seat,” and the pandemic gave “us a green light to see what we are capable of,” Slaine recalled.

Since May 15, Florida has allowed restaurants to open dining rooms at 50 percent capacity. About 90 percent of Moe’s employees returned to work and were following local, state and federal safety guidelines, said Grooms, vice president, who worked for Steak n’ Shake and Krystal before joining Quality Fresca. Franchised outposts are in coastal markets (Naples, Fort Myers, Tampa and Jacksonville), plus Gainesville and Tallahassee.

Slaine declined to reveal the extent to which sales volumes had recovered since reopening dining rooms, but said they were “not quite like a QSR with a drive-thru.” In March 2019, Franchise Times reported Moe’s average unit volumes were $1.01 million with four-wall EBITDA, or cash flow, averaging $160,692.

Slaine, though, was eager to describe the complicated acquisition. “Quality Fresca was in a unique situation. Four franchisees, all separate companies, decided they wanted to sell their businesses as a package. There are very few people who could have it done it on the timeline we did,” he said. “It was incredibly difficult to close four deals basically on the same day.”

The sellers’ investment banker had rolled the four entities into one. Slaine begged off revealing the transaction’s valuation. “But I will tell you we ran due diligence on four separate companies, all towards a simultaneous closing date,” he said. “We’ve not only been smart in finding deals but also putting them together and getting them done.”

QRG is backed by private investment firm GenRock Capital. Its investors have also funded the company’s acquisitions of 200 Pizza Hut and 27 Arby’s restaurants since 2017. QRG has also used bank financing to acquire restaurant properties.

I asked Slaine about the group’s growth strategy given that investment horizons must now be stretched. “Our long-term play is, let’s get through this and put pandemic crisis-handling behind us—and then look to grow our footprint and remain a significant player in the Moe’s system.”